Page 151 - AA Integrated Workbook STUDENT 2018-19

Systems and controls

Exam focus

The exam will regularly feature a requirement asking for identification and
explanation of control deficiencies from a scenario and recommendations to
overcome the deficiencies identified.

Identification and explanation

Identification of the deficiencies is usually quite straightforward. You should look for
information which indicates:

 Controls are missing e.g. Sales orders are not sequentially numbered.

 Controls are not effective e.g. Bank reconciliations are supposed to be
performed but often don’t get done due to lack of time.

Work with the information provided. Do not assume that because something isn’t
mentioned it isn’t happening.

Explanation of the deficiency requires you to give a business risk or a risk of
misstatement in the accounting records. It is not an explanation if you only say this
should not be done or this should be done. You must explain what the control would
achieve if it was in place and working effectively. The explanation needs to be
sufficiently detailed. If you only explain the deficiency in part you will not earn the
explanation marks.

Recommendation

The recommendation also needs to be sufficiently detailed. Try and recommend
which person within the company should perform the control and how frequently.
Sometimes a control requires more than one element to be effective therefore make
sure you suggest everything that needs to happen to make the control effective.

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